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Jury Finds Former Credit Suisse Broker Guilty of Securities Fraud
Investor Losses Total Nearly $1 Billion
Benton J. Campbell, United States Attorney for the Eastern District of New York,
announced that a federal jury in Brooklyn returned verdicts today in which they found former
Credit Suisse broker Eric Butler guilty of conspiracy and securities fraud after a three week trial.
When sentenced by Senior United States District Judge Jack B. Weinstein, Butler will face a
maximum sentence of 45 years’ imprisonment.
The evidence at trial established that Butler and Julian Tzolov, another former Credit
Suisse Broker, defrauded their clients in order to obtain higher sales commissions.1 Butler and
Tzolov sold auction rate securities (“ARS”) backed by mortgages to Credit Suisse clients who, in
fact, had placed orders to buy ARS backed by government-guaranteed student loans. Butler and
Tzolov told their clients that student loan-backed ARS were very low-risk investments
guaranteed by the United States government and that the market for the securities was very
liquid. As a result, a number of the companies agreed to invest money in these ARS. However,
without the knowledge or consent of the companies, Butler and Tzolov began to use the
companies’ funds to purchase riskier higher-yield, mortgage-backed collateralized debt
obligations, or “CDOs,” which paid Butler and Tzolov higher commissions. CDOs are assetbacked
products built from a portfolio of fixed-income assets, including mortgages, subprime
mortgages, and second mortgages, many of which were not guaranteed by the government.
Butler and Tzolov concealed their scheme by falsifying the names of the ARS the clients bought
and otherwise misleading the clients into believing they had bought ARS backed by student
loans. In approximately August 2007, the scheme was discovered when the market for the
mortgage-backed CDOs purchased by the companies collapsed and various auctions for CDOARS
began to fail. The resulting losses to investors totaled almost $1 billion.
“The defendant’s fraudulent misrepresentations saddled investors with unknown risks
they did not bargain for,” stated United States Attorney Campbell. “This case shows that those
who engage in such schemes will be held to account for their criminal activity.” Mr. Campbell
expressed his grateful appreciation to the Federal Bureau of Investigation and the United States
Securities & Exchange Commission for their assistance during the trial.
The government’s case was prosecuted by Assistant United States Attorneys Greg D.
Andres, Daniel Spector, and John Nowak.
The Defendant:
Name: ERIC BUTLER
Age: 36
1 Tzolov pleaded guilty to conspiracy, securities fraud, and other charges arising from the scheme on July 22.
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